]]>https://www.buildsmartbradley.com/2017/12/rea-or-a-claim-which-path-do-you-choose/feed/0dowen@bradley.comhttps://www.buildsmartbradley.com/2017/12/rea-or-a-claim-which-path-do-you-choose/Final Countdown to DFARS Cybersecurity Compliancehttp://feeds.lexblog.com/~r/BuildSmart/~3/zp4MKv7bxq0/
https://www.buildsmartbradley.com/2017/11/final-countdown-to-dfars-cybersecurity-compliance/#respondThu, 30 Nov 2017 18:25:01 +0000https://www.buildsmartbradley.com/?p=630Continue Reading]]>Most federal defense contractors are aware that December 31, 2017, is the deadline for them to comply with National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations. However, many defense contractors (understandably) remain perplexed about not only the details of the requirements, but the basics. This article provides answers to some of the most basic, yet commonly asked, questions regarding the new requirements.

In a nutshell, what is required by December 31, 2017?

The Department of Defense amended the Defense Federal Acquisition Regulation Supplement (DFARS) in 2016 to provide for the safeguarding of Controlled Unclassified Information when transiting through or residing on a contractor’s internal network or information system. DFARS Clause 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, requires contractors to implement NIST SP 800-171 to safeguard “covered defense information” that is stored on or processed in their internal network or information system. Additionally, DFARS Clause 252.204-7012 requires contractors to report, within 72 hours of discovery, any cyber incidents that may have affected “covered contractor information systems.” DFARS Clause 252.204-7008, Compliance with Safeguarding Covered Defense Information Controls, states that, by submitting an offer, “the Offeror represents that it will implement the security requirements specified by [NIST SP 800-171] . . . not later than December 31, 2017.”

What if my company cannot fully comply by December 31, 2017?

A December 2016 update to NIST SP 800-171 (Revision 1) provides some relief to covered contractors who cannot fully comply with the requirements by December 31, 2017. Revision 1, which provides guidance on the use of System Security Plans (or SSPs) and Plans of Action and Milestones (or POAMs), states in relevant part:

Nonfederal organizations should describe in a system security plan, how the specified security requirements are met or how organizations plan to meet the requirements. The plan describes the system boundary; the operational environment; how the security requirements are implemented; and the relationships with or connections to other systems. Nonfederal organizations should develop plans of action that describe how any unimplemented security requirements will be met and how any planned mitigations will be implemented.

Then, in September 2017, the Director of Defense Pricing/Defense Procurement and Acquisition Policy issued a memorandum addressing implementation of DFARS Clause 252.204-7012. This memorandum provides additional guidance on SSPs and POAMs as follows:

To document implementation of the NIST SP 800-171 security requirements by the December 31, 2017, implementation deadline, companies should have a system security plan in place, in addition to any associated plans of action to describe how and when any unimplemented security requirements will be met, how any planned mitigations will be implemented, and how and when they will correct deficiencies and reduce or eliminate vulnerabilities in the systems. Organizations can document the system security plan and plans of action as separate or combined documents in any chosen format.

The memorandum further states that a “solicitation may require or allow elements of the system security plan which demonstrates/documents implementation of NIST SP 800-171, to be included with the contractor’s technical proposal, and may subsequently be incorporated (usually by reference) as part of the contract[.]” However, the memorandum reiterates that “DFARS Clause 252.204-7012 requires the contractor that is performing a contract awarded prior to October 1, 2017, to notify the DoD [Chief Information Officer] of any requirements of NIST SP 800-171 that are not implemented at the time of contract award.”

Must my subcontractors comply?

Yes. Covered defense contractors must include DFARS Clause 252.204-7012 in subcontracts, or “similar contractual instruments,” for “operationally critical support” or for which performance will involve “covered defense information.” Among other things, covered contractors must also require subcontractors to “[p]rovide the incident report number, automatically assigned by DoD, to the prime Contractor (or next higher-tier subcontractor) as soon as practicable, when reporting a cyber incident to DoD” as required in DFARS Clause 252.204-7012. Moreover, given that most covered prime contractors will be required, either explicitly or implicitly, to certify compliance with the requirements, prime contractors would be wise to require subcontractors to certify their own compliance to the prime contractor.

What are some of the consequences for non-compliance?

Potential consequences for noncompliance with DFARS Clause 252.204-7012 and NIST SP 800-171 include, but certainly are not limited to, losing a contract award; being subjected to a bid protest; being found to have breached an awarded contract; being terminated for default; and/or negative past performance reviews. Potential consequences for falsely certifying compliance may include, but are not limited to, False Claims Act liability; liability under the various false statement statutes; default termination; negative past performance reviews; suspension; and/or debarment.

Wait, I have more questions!

If you have any questions about any of the foregoing requirements or any related issues, please do not hesitate to contact Aron C. Beezley, the head of Bradley’s Government Contracts Cybersecurity team.

]]>https://www.buildsmartbradley.com/2017/11/final-countdown-to-dfars-cybersecurity-compliance/feed/0abeezley@bradley.comhttps://www.buildsmartbradley.com/2017/11/final-countdown-to-dfars-cybersecurity-compliance/Bradley to Present at the 32nd Annual Construction SuperConferencehttp://feeds.lexblog.com/~r/BuildSmart/~3/ECnSOuX8l7U/
https://www.buildsmartbradley.com/2017/11/bradley-to-present-at-the-32nd-annual-construction-superconference/#respondTue, 28 Nov 2017 21:17:58 +0000https://www.buildsmartbradley.com/?p=625Continue Reading]]>Three Bradley attorneys will participate in two different presentations at the 32nd Annual Construction SuperConference in Las Vegas, Nevada from December 4 – 6, 2017.

Bradley partners, David Owen and Jim Archibald, will facilitate a panel discussion on subsurface conditions entitled “Taking on Subsurface Risks: How to Allocate Subsurface Risk and Lessons Learned from an Owner, Contractor and Geotechnical Expert.” David and Jim will be joined by Tim Fisk from NRG Energy, Inc., Wilson Nash from Brasfield & Gorrie, Inc., and Dr. Dan Brown from Dan Brown & Associates.

Also, Bradley partner, Doug Patin, will present in a conference session regarding claim modeling and presentation entitled “High Tech Tools by Experts in Construction Litigation and Arbitration: How to Do It Right and How to Tear It Down.” Doug will be joined by Charles Choyce from Berkley Research Group, Benjamin Crosby from W.G. Yates & Sons Construction, and Anthony Meagher from DLA Piper.

In the session on subsurface conditions, David, who is also a registered professional engineer, will moderate the discussion, and Jim will provide a legal analysis of the different ways to allocate subsurface risks in the prime contract. Mr. Fisk, as an owner representative, will discuss some major subsurface issues that he has encountered on mega-construction projects. Mr. Nash, as an in-house lawyer for a general contractor, will speak about his experiences with subsurface conditions and some of the strategies that general contractors can apply to successfully mitigate risks. Finally, Dr. Brown, who is a renowned geotechnical expert and civil engineer, will present some subsurface case studies and explain how to interpret and utilize a geotechnical report.

In the session on claim modeling and presentation, the panelists will discuss how to effectively use graphic presentations to support claims and monitor the progress of the construction work. They will also analyze the effectiveness of contemporaneous Building Information Modeling, Critical Path Method scheduling, and 4-D presentations.

The panelist will also explain some of the mistakes that contractors make during construction that can have an adverse impact on their claims. Additionally, they will recognize some “best practices” and share examples where the panelist or their expert successfully resolved or presented a claim by appropriately using “high tech tools” during the construction or claims process. Finally, the attorneys on the panel will discuss how to attack 4-D presentations, and other advanced models or schedules, through effective cross-examination.

We look forward to the upcoming Annual Construction SuperConference and the chance to connect with our clients and colleagues.

]]>https://www.buildsmartbradley.com/2017/11/bradley-to-present-at-the-32nd-annual-construction-superconference/feed/0dmurdock@bradley.comhttps://www.buildsmartbradley.com/2017/11/bradley-to-present-at-the-32nd-annual-construction-superconference/GAO Bid Protest Sustain Rate Remains High in FY 2017http://feeds.lexblog.com/~r/BuildSmart/~3/0PkwIQ_tIX0/
https://www.buildsmartbradley.com/2017/11/gao-bid-protest-sustain-rate-remains-high-in-fy-2017/#respondTue, 14 Nov 2017 21:04:31 +0000https://www.buildsmartbradley.com/?p=617Continue Reading]]>The Government Accountability Office (GAO) recently issued to Congress its annual bid protest report. Of particular note, the report states that, “[o]f the protests resolved on the merits during fiscal year 2017, [GAO] sustained 17 percent of those protests.” By comparison, in fiscal year 2016, GAO sustained 22 percent of the protests resolved on the merits, and in fiscal year 2015, GAO sustained 15 percent of the protests resolved on the merits—a percentage that is in line with GAO’s historical protest “sustain rate” of approximately 10-12 percent. Thus, while the percentage of fiscal year 2017 “sustained” protests—i.e., protests in which the GAO found in favor of the protester on the merits—is not quite as high as last year’s sustain rate, the fiscal year 2017 sustain rate is still very high by historical standards.

In addition, protesters received some relief in 47 percent of the protests (up from 46 percent in fiscal year 2016). GAO reports this statistic as an “effectiveness rate”—i.e., the percentage of protests where the protester obtained “some form of relief from the agency . . . either as a result of voluntary agency corrective action or [GAO] sustaining the protest.” In fiscal year 2017, protesters thus received some form of relief from the agency in nearly half of the protests filed with GAO.

]]>https://www.buildsmartbradley.com/2017/11/gao-bid-protest-sustain-rate-remains-high-in-fy-2017/feed/0abeezley@bradley.comhttps://www.buildsmartbradley.com/2017/11/gao-bid-protest-sustain-rate-remains-high-in-fy-2017/The Importance of Maintaining a Safe Construction Sitehttp://feeds.lexblog.com/~r/BuildSmart/~3/3hbbRMuFVQI/
https://www.buildsmartbradley.com/2017/11/the-importance-of-maintaining-a-safe-construction-site/#respondWed, 08 Nov 2017 17:43:56 +0000https://www.buildsmartbradley.com/?p=614Continue Reading]]>In October, a Florida jury found a general contractor liable for $45 million for the death of a motorist killed by one of the contractor’s trucks pulling out of a road construction job site. The case highlights the importance of maintaining a safe and accessible construction site both for the workers on-site and civilians located or traveling nearby.

In 2014, the Florida Department of Transportation (FDOT) awarded a contract for the construction of a segment of an I-75 renovation project to the contractor. The contract was for over $85 million. The work site for the project was an active stretch of the I-75 interstate in Broward County, Florida. The contractor performed work in closed lanes and along the median of the highway during the project.

On May 28, 2015, while exiting the job site, a truck driver working on the project attempted a U-turn with a heavily loaded truck at a dangerously low speed. The truck driver’s slow maneuver caused oncoming motorists to crash into the tractor-trailer. One of the motorists, the husband of the plaintiff in the lawsuit, died upon impact with the truck.

The plaintiff’s complaint alleged that the contractor failed to provide a safe method of exiting the work site which resulted in the death of her husband. The plaintiff contended that the contractor should have had a detailed plan for the maintenance or control of traffic and that such requirements were a part of the contractor’s agreement with FDOT.

The trial lasted four weeks. At trial, the plaintiff also argued that the contractor had received prior verbal and written warnings of deficiencies in its safety plan for the project. The jury agreed with the plaintiff and found the contractor had violated the requirements of its contract with FDOT and had acted negligently in causing the death of the plaintiff’s husband.

Of note, the jury found the contractor liable even though the truck driver who caused the motorist’s death was actually an employee of a subcontractor. The $45 million verdict included $20 million in compensatory damages and $25 million in punitive damages. The amount of the punitive damages and the imposition of vicarious liability on the contractor should serve as a stark reminder to all construction industry participants regarding the importance of providing a safe work environment. Ignoring safety standards can result in serious injury or the tragic loss of life, and the resulting civil damages liability can be crippling to any contractor, regardless of size.

Overview of “New” Bid Protest Process

A. Who May Protest and When

The Code now grants the right to protest to “[a]ny aggrieved party,” CO ST § 24-109-102(1) (2017) instead of “[a]ny actual or prospective bidder, offeror, or contractor who is aggrieved,” CO ST § 24-109-102(1) (1996), expanding the pool of potential protesters. The revisions also enlarge the time for filing protests from seven days to ten business days after the party knows or should have known of the facts giving rise to the protest. CO ST § 24-109-102(1) (2017). However, the protest of a small purchase solicitation or award of a contract must be submitted within three business days, unless the procurement official extends the time period to ten business days.

B. Stay of Procurement

The Code now also expressly provides for the stay of procurements pending resolution of the protest. Specifically, the revised Code states that “[a] contract resulting from a request for proposals is not awarded until any protest made in connection with the request for proposals has been resolved pursuant to section 24-109-102(2).” CO ST § 24-109-103 (2017). Given the Code’s specific reference to stay of procurements in connection with a , though, it appears that the stay may not apply to other types of procurements, including those issued under an invitation for bids. It also appears that the stay under this section is only applicable to the initial protest, and not to any subsequent appeal because, as discussed below, the Code sets a $1,500,000 threshold for the stay of a contract award on appeal.

C. Decision on the Protest

The procurement official or his or her designee has the power to settle the protest. If the official chooses not to do so, then he or she must issue a written decision within ten business days after the protest was filed. CO ST § 24-109-102(2) (2017). The decision is to be based on and limited to a review of the material issues raised by the protester, and must set forth each factor taken into account in reaching the decision. Id. If a written decision is not issued within the required time period, then the protester may continue with the protest as if the procurement official or his or her designee had rendered an adverse decision.

D. “Appeal” Procedures

The procurement official’s decision is final and conclusive unless the aggrieved party appeals the decision to the Executive Director of the Colorado Department of Personnel and Administration or commences an action in court. CO ST § 24-109-107. Accordingly, protesters have two options for appealing an adverse protest decision — either file an appeal with the Executive Director or file an action in the district court of the city and county of Denver. On appeal, the stay of contract award remains applicable for contracts issued under a request for proposals valued at $1,500,000 or more, unless the Executive Director or his or her designee determines that an override of the stay is in the best interest of the state. CO ST § 24-109-201(2).

An appeal to the Executive Director must be filed within ten business days of the date that a decision is mailed or otherwise furnished to the aggrieved party. CO ST § 24-109-203(1). The Executive Director must then issue a written decision within thirty business days after receipt of the appeal. CO ST § 24-109-204. An adverse decision of the Executive Director may also be appealed to the district court for the city and county of Denver. CO ST § 24-109-205. Any such appeal must be initiated within ten business days after the decision was rendered. CO ST § 24-109-206(1).

E. Remedies

The remedies available to protesters are limited by the revised Code as follows:

If, prior to the awarding of a contract, the procurement official determines that a solicitation or the proposed award is in violation of the Code, then the solicitation or proposed award must be cancelled or revised to comply with the Code. The procurement official’s determination to do so is not subject to further administrative or judicial review.

After award, if the procurement official determines that the solicitation or award violates the Code, the procurement official may cancel or terminate such solicitation or award, and direct the governmental body to modify such solicitation or award to eliminate the violations. Additionally, if the procurement official determines that the solicitation or award is in the best interests of the state, the procurement official may submit the recommendation to ratify the solicitation or award to the executive director or the chief procurement officer or a designee of either officer. If the executive director or chief procurement officer elects to ratify the solicitation or award, the aggrieved party who should have been awarded the contract under the solicitation, but was not, will be entitled to its reasonable costs incurred in connection with the solicitation, including bid preparation costs. The costs, however, do not include attorney fees. The acceptance of costs by the aggrieved party constitutes a waiver of the right to appeal the determination of the executive director or the chief procurement officer.

If a protest has been appealed to the court, and upon judicial review it is determined that a solicitation or proposed award violates the Code, then the court will direct the executive director to determine whether the best interests of the state require ratification, termination, or cancellation of the solicitation, award, or contract. The executive director or his or her designee must issue a determination in writing, within ten business days of the court’s direction, and direct the purchasing agency to comply with the determination. The executive director’s determination under the direction of the district court will not be subject to further administrative or judicial appeal or review.

If the executive director ratifies a solicitation or award in violation of the Code, the aggrieved party who should have been, but was not, awarded the contract under the solicitation will be entitled to their reasonable costs incurred in connection with the solicitation, including bid preparation costs. The costs, however, do not include attorney fees.

Conclusion

If your company performs—or is thinking about bidding or proposing on—State of Colorado-funded contracts, you need to know how to protect your company from a defective solicitation or from an unreasonable evaluation and award. More specifically, you and your lawyer must be familiar with the “new” Colorado bid protest process. If you have any questions about the Colorado-unique bid protest process, please feel free to contact Aron C. Beezley or Lisa A. Markman.

Aron Beezley is licensed to practice law in Colorado and the District of Columbia, and Lisa Markman is licensed to practice law in California and the District of Columbia.

]]>https://www.buildsmartbradley.com/2017/10/bid-protests-in-colorado-important-new-changes/feed/0abeezley@bradley.com, lmarkman@bradley.comhttps://www.buildsmartbradley.com/2017/10/bid-protests-in-colorado-important-new-changes/For Government Contractors: Unsigned Claim Certification Is an Incurable Defecthttp://feeds.lexblog.com/~r/BuildSmart/~3/_0WJ_1zl-0M/
https://www.buildsmartbradley.com/2017/10/for-government-contractors-unsigned-claim-certification-is-an-incurable-defect/#respondWed, 25 Oct 2017 16:16:28 +0000https://www.buildsmartbradley.com/?p=598Continue Reading]]>In September, the Armed Services Board of Contract Appeals (ASBCA) addressed the certification requirements under the Contract Disputes Act (CDA). A motion to dismiss by the U.S. Government prompted the ASBCA to consider whether the claimant’s typewritten name in the claim certification invalidated the Board’s jurisdiction over the dispute. Based on prior decisions, the ASBCA sided with the Government concluding that an unsigned certification was insufficient to bestow jurisdiction under the CDA and FAR.

The contractor in this appeal contracted with the Government in 2011 to build a dining facility in Kyrgystan. In 2014, the Government issued a suspension of work notice. Two years later, the contractor submitted a claim to the contracting officer for withheld payments and included the following certification language in its transmittal email:

I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of the contractor.

The contractor’s certification transmittal included a typewritten name in the signature block of the email but, notably, did not include a digital or handwritten signature of any kind. Subsequent negotiations between the contractor and the Government were unsuccessful, and the contractor ultimately filed an appeal with the ASBCA arising out of a deemed denial of its claim.

The Government moved to dismiss the contractor’s claim arguing that the contractor’s certification was improper under the CDA because it lacked a signature rendering the claim void and depriving the ASBCA of jurisdiction to hear the appeal. The ASBCA noted that the FAR mandates that any certification under the CDA must be executed by a “person duly authorized to bind the contractor.” Based on prior Board decisions, the ASBCA further concluded that “execution” requires a signature or a “discrete, verifiable symbol of an individual which, when affixed to a writing with the knowledge and consent of that individual, indicates a present intent to authenticate the writing.” The ASBCA acknowledged that a signature could be digital and need not be handwritten.

With respect to the contractor in the present appeal, the ASBCA held that the typewritten name in the signature block was insufficient to satisfy the “execution” requirements under the CDA and FAR. The ASBCA rejected the contractor’s argument that the parties’ practice was to accept each other’s signature block as an “email signature” noting that the parties’ course of dealing cannot overcome the certification “execution” requirements and that parties cannot confer jurisdiction by agreement. In accordance with past decisions, the Board also rejected the contractor’s argument that its invalid signature could be corrected and applied retroactively to the claim.

Compliance with the CDA requirements and applicable FAR provisions is crucial when submitting a claim to the Government. As this case illustrates, technical defects in compliance may be fatal to an otherwise valid claim. To avoid mishaps such as the one described above, contractors should be ever mindful of these requirements throughout the claims submission process. That’s why it’s important to invest in experienced and knowledgeable project managers and contract administrators and why it can be valuable to have a skilled government contracts attorney involved early on in the development of the claim. In the appeal above, the ASBCA noted that the contractor did not retain counsel until after it had filed its appeal with the ASBCA. Had the contractor consulted with an attorney prior to submitting its certified claim, it might have avoided the signature defect and the resulting dismissal of its appeal.

]]>https://www.buildsmartbradley.com/2017/10/for-government-contractors-unsigned-claim-certification-is-an-incurable-defect/feed/0akahlon@bradley.comhttps://www.buildsmartbradley.com/2017/10/for-government-contractors-unsigned-claim-certification-is-an-incurable-defect/A Lesson on Good Faith and Fair Dealing in Solar Constructionhttp://feeds.lexblog.com/~r/BuildSmart/~3/j-kwW-NbQp0/
https://www.buildsmartbradley.com/2017/10/a-lesson-on-good-faith-and-fair-dealing-in-solar-construction/#respondTue, 17 Oct 2017 16:29:53 +0000https://www.buildsmartbradley.com/?p=595Continue Reading]]>Late last year, a federal trial court in New York awarded a solar development company $11.6 million in damages against Suffolk County arising out of a dispute on a multi-site carport solar construction project. The basis for this substantial award? The County failed to satisfy its obligation to cooperate with the developer on permitting issues under the parties’ lease agreement. After an extensive dive into the facts of the dispute, the court concluded that the County’s deliberate efforts to stall and frustrate the permitting process violated the lease agreement’s requirement that the County “fully cooperate with the developer in the conduct of its operations and the exercise of its rights.”

In 2010, the developer, EDF Renewable Development, contracted with Suffolk County under a series of lease agreements to supply 20 MW of solar power on seven different carport solar installations throughout the county. As part of the permitting process under certain of the lease agreements, the County required the developer to supply a parking replacement or parking mitigation plan. The court found that the parties’ course of dealing on the permitting process on each of the first six carport sites involved a collaborative approach and the use of conditional permitting to expedite construction.

Because of global supply shortages, the developer elected to procure all solar panels for the seven carport sites along with frame steel in advance of construction. Based on the evidence presented, the court noted that had the developer awaited permit approval prior to ordering panels and frames for each site, the developer would not have been able to complete construction of each site on time. With the exception of the final site, the parties’ collaborative conduct allowed construction of each of the other six solar installations to proceed smoothly and without issue.

In January 2012, the County experienced turnover in its leadership, and the new leadership was approached by a retail developer who opposed the remaining carport solar installation. The new County administration agreed that it would not support completion of the remaining solar installation. The County did not inform the solar developer of this agreement and, instead, for the next three months, the County intentionally stalled and delayed all activity relating to the remaining carport site.

Unaware of the County’s intent, the solar developer continued to finalize conditional permitting and started construction as it had done with each of the six previous carport sites. As time progressed, the County representatives became more and more uncooperative and unwilling to communicate with the developer in any meaningful way in regards to permitting the project, including developing a plan for replacement parking. Finally, in March 2012, the County, for the first time, communicated to the developer that it “preferred” not to proceed with the remaining carport installation and requested that the parties look for an alternative site for the installation. The developer participated in such discussions, but no mutually agreeable alternative site was located.

During these discussions, the County never complained about the lack of a parking replacement plan as being the basis for not proceeding with the carport installation. The trial court concluded that the County’s sole motivation in rejecting and halting the final carport installation was to accommodate the retail developer’s request that the carport installation at the final site not go forward. The court further determined that the County failed to comply with its good faith contractual duty to cooperate with the solar developer in securing permitting and a replacement parking plan for the final carport site, which constituted a material breach of the parties’ lease agreement.

With respect to damages, the court found that the developer’s decision to purchase the solar panels in advance of construction of each site was supportable given the evidence of a global shortage at the time of contracting in 2010 and that the developer properly mitigated its damages by re-selling the panels and steel material at reasonable rates. Thus, the court awarded the developer its remaining out-of-pocket costs incurred for procurement and project preparation costs, as well as prejudgment interest, for a total award of $11.6 million.

As the court noted, although the County was not required to issue a building permit or to relax the permitting requirements under the lease agreement, those facts did not allow the County to actively and deliberately frustrate the permitting process. By ignoring its good faith obligations under the lease agreement, the County’s efforts to sabotage the final carport solar installation backfired tremendously. The principle of good faith and fair dealing is well-recognized and, often, an express duty in many commercial contracts such as the one in this case. Here, the court demonstrated that a party’s intentional efforts to abuse certain contract provisions to avoid performance is a breach of that duty of good faith and can result in substantial financial award against the non-performing party.

An issue that repeatedly comes up in construction disputes is the scope of an arbitration agreement. Courts generally interpret agreements to arbitrate broadly, and, where the arbitrability of a specific claim has been at issue, courts often defer, allowing such questions to be answered by the arbitrator. One recent opinion from the Ninth Circuit followed this general approach.

In Portland General Electric Co. v. Liberty Mutual Insur. Co., an owner contracted with a general contractor to construct a power plant in Oregon. The work started in 2013. In the contract, the parties consented to the exclusive jurisdiction of any federal court in Oregon. The contract also required a performance bond, and the bond agreement included a statement that “any proceeding, legal or equitable, under this bond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located.”

In addition to the bonding requirement, the owner also required the contractor to obtain a written guaranty of performance from its parent company. In the guaranty, the owner and parent company consented to submit any disputes in connection with the guaranty to binding arbitration under the International Chamber of Commerce (ICC) Rules. The guaranty also specified that, once the arbitration proceeding was commenced, either party could implead any other entity (with its consent) in, and/or raise any claim against, any other entity provided such claim arose out of or in connection with an agreement with a subcontractor or the guaranty.

On December 18, 2015, the owner terminated the general contractor. In response, the contractor’s parent company filed a demand for arbitration. The contractor claimed it had not defaulted, that the termination was wrongful, and that the owner was due nothing under the guaranty agreement. Shortly thereafter, the parent company impleaded the surety under the performance bond invoking the impleader provision of the guaranty agreement and Article 7 of the ICC Rules. The surety consented and sought relief similar to that of the parent company.

The owner objected to the inclusion of the surety and sought a preliminary injunction in federal district court to prohibit joinder of the surety into the arbitration. The owner claimed that the contractor’s parent company had improperly impleaded the surety as part of a collusive effort to arbitrate claims that the owner and surety had agreed to litigate in Oregon courts. The district court granted the injunction, and the surety appealed.

On appeal, the surety argued that the owner’s election to arbitrate in the guaranty agreement and the ICC Rules left the issue of arbitrability of a particular claim up to the arbitrator and not the district court. The Ninth Circuit agreed with the surety, reversed the district court’s decision, and remanded the question of whether the surety’s claims could be arbitrated to the ICC arbitrator. The Ninth Circuit noted that “parties may delegate the adjudication of gateway issues such as arbitrability of claims to the arbitrator if they clearly and unmistakably agree to do so.” The court then determined that the incorporation of the ICC Rules into the guaranty accomplished just such a delegation, where the rules expressly set forth in Article 6(3) that the arbitral tribunal had the power and authority to determine its own jurisdiction over a particular claim or question. The court reached this conclusion even though neither the performance bond nor the construction contract provided for any agreement to arbitrate disputes between the surety and the owner.

The Ninth Circuit showed deference to the parties’ agreement to arbitrate, and the court’s decision highlights the importance of dispute provisions in contracts, even when found in exhibits or addenda incorporated by reference (e.g., bond or guaranty agreements). Here, the owner likely did not anticipate addressing any claims under the bonds in arbitration, but, because of the guaranty’s broad impleader language and its incorporation of the ICC Rules, the owner ended up in a disfavored forum. And, although the arbitrator may later determine he or she lacks jurisdiction over the surety’s claims, when give the opportunity, arbitrators often reach the opposite conclusion and find a claim arbitrable. Given that reality, the Portland General Electric case demonstrates that all construction industry participants should be mindful of the deference courts will give to arbitrators when determining the arbitrability of claims.

]]>https://www.buildsmartbradley.com/2017/09/my-roof-my-rules-arbitrators-may-determine-their-own-jurisdiction-when-the-parties-delegate-that-authority/feed/0akahlon@bradley.comhttps://www.buildsmartbradley.com/2017/09/my-roof-my-rules-arbitrators-may-determine-their-own-jurisdiction-when-the-parties-delegate-that-authority/Can My Company Protest the Addition of Other Contractors to the IDIQ Pool?http://feeds.lexblog.com/~r/BuildSmart/~3/xLL2APxLbuU/
https://www.buildsmartbradley.com/2017/09/can-my-company-protest-the-addition-of-other-contractors-to-the-idiq-pool/#respondThu, 14 Sep 2017 20:59:56 +0000https://www.buildsmartbradley.com/?p=589Continue Reading]]>Bradley partner Aron Beezley recently published a Law360 Expert Analysis article on the jurisdictional issues associated with bid protests challenging the addition of other contractors to an indefinite-delivery, indefinite-quantity (or IDIQ) pool. As discussed in the article, the answer to the question, “Can my company protest the addition of other contractors to the IDIQ pool?” depends on whether you ask the Government Accountability Office (GAO) or the U.S. Court of Federal Claims. According to GAO, the answer is “no.” According to the Court, however, the answer is “yes.” Thus, as the article explains, companies seeking to challenge the addition of other contractors to an IDIQ pool should do so at the Court of Federal Claims, rather than at GAO.

The Expert Analysis article was published by Law360 on September 14, 2017. If you have any questions about any of the topics discussed in the article, please do not hesitate to contact Aron Beezley.